As we enter the prime holiday shopping season, economic forecasters remain cautious about the state’s economy, jobs and tax revenue growth.  State lawmakers fret that the economy is not producing enough tax revenue to cover all the budget demands for the 2013-15 biennium that begins next July 1.

On the employment front, Washington’s unemployment rate remains above the national average at 8.2%.  Looking at a county by county map of Washington, you can see there are significant disparities among counties.

Unemployment rates vary from a low of 5.3% in Whitman (home to WSU) to a high of 11.3% in Lewis and Grays Harbor counties.  King County is below the state average at 6.5% unemployment, which is fairly healthy.

The state’s tech industries continue to grow, albeit more slowly than in the past couple of years.  Software publishing employment actually dropped slightly in the Oct. 2011 to Oct. 2012 time period by 200 jobs.  Software publishers still employ 51,800 in Washington at the highest average salary in the state at just over $140K/yr.

Computer system design/custom software grew 800 jobs in the past year to 37,500.  These in-demand jobs pay on average $100K/yr.

You can find a great deal of useful employment data at Employment Security’s website, www.workforceexplorer.com.

The state’s Economic Revenue and Forecast Council, www.erfc.wa.gov, has the task of projecting how much tax revenue the state will collect in future periods.  This group does a lot of economic analysis and reports quarterly on economic and revenue projections.

In their latest report, the ERFC has the state collecting $30.47 billion for the 2011-13 period ending June 30, 2013.  Their projections for the 2013-15 period are for the state to collect $32.65 billion – a $2+ billion increase.

You can read the ERFC report here: http://www.erfc.wa.gov/publications/documents/sep12pub.pdf

Yet the spending demands will overtake revenues by $1 billion or more due to K-12, higher education, health care, social services, corrections and the environment.  Legislators will be under pressure to limit the growth of the state budget and to raise revenues.  With the passage of another initiative that limts the legislature’s ability to raise taxes, except by a 2/3 vote, there is a strong likelihood that there will be a referendum to increase taxes or limit tax credits/deductions/exemptions.

WTIA and the tech industry broadly has an interest in both sides of the budget equation–spending and taxes.

WTIA advocates for improved K-12 math and science education.  Hiring well qualified math and science teachers costs money as does implementing higher standards, testing and evaluation and adopting technology in schools.

The tech industry is also very supportive of funding higher education that has taken major budget hits the last few years.  Tuition has gone up, new STEM related scholarship programs are available but state support is critical to maintain a world class college and university sysem.  Combined with the higher cost of computer science and engineering degrees, it has been difficult to see major increases in STEM degree production.  Progress has been made.  The legislature directed the state’s universities to devote a certain percentage of their budgets to expanding CS and EE.  This has resulted in the hiring of faculty and more students than ever in these important and high demand programs.

The tech industry also takes advantage of tax credits for research and development (B&O credit and a sales tax deferral).  These are the only economic development tools available to the majority of tech companies, across all sectors including computing, biotech, devices, energy and materials.  There are some “specialty” tax incentives for semiconductors, solar panel manufacturing and data centers in rural areas  but the R&D credits are the most useful and valuable.

A $100 million company (by revenue) that does $15 mil in R&D spending can get a B&O credit of about $200,000, which lowers their B&O tax from $1.8 mil to $1.6 mil.  This helps the company deploy resources more efficiently and the state still collects substantial B&O tax.

These R&D credits expire in 2015.  WTIA and other business organizations will be lobbying for an extension of these useful tax incentives.